BJ's Wholesale Club is Wednesday's IBD Stock Of The Day as the discount retailer dodges the worst of Trump tariffs while offering a refuge for customers amid higher inflation and an uncertain economic outlook. BJ stock has powered higher during the recent stock market correction, barely breaking stride.
In an April 3 note, following the prior day's unveiling of President Donald Trump's "reciprocal" tariffs, Citi analyst Steven Zaccone raised his price target for BJ stock to 130 from 115, while upgrading the discount retailer to buy from neutral.
Zaccone called BJ's a "tariff & trade down relative winner," citing its relatively limited exposure to tariffs and its potential to gain customers searching for value.
BJ's Tariff Exposure
In a March 6 note, William Blair analyst Phillip Blee wrote, "Tariffs are not as much of a concern here given the company maintains low-single-digit exposure to China." He added that "any impact from Canada and Mexico is primarily related to food, where we expect the impact will be absorbed by higher prices across the broader industry."
Blee sees expects "inflation-weary consumers will likely continue to seek value further driving traffic at its stores."
BJ's also has less reliance on consumer discretionary purchases that face stronger headwinds when the economy sags. Blee says 85% of BJ's nonfuel sales come from "groceries and sundries," compared to 50% at Costco, 60% at Walmart and 70% at Sam's Club.
BJ's Growth Momentum
The wholesale club model offers a relatively limited selection of goods, giving BJ's more bargaining power with suppliers, and depends on less labor. That adds up to a 25% discount relative to grocery competitors, BJ's says.
Blee noted that comparable-store sales rose 4.2% in the second half of 2024, "putting the company in line with some of the best-in-class retailers." That underscores the appeal of BJ's value proposition and its ability to grow into new markets.
BJ's is in 21 states, but is accelerating its expansion plans with 25 to 30 new clubs planned to open over the next two years. That's a 5.4% growth rate, up from 2.9% the past two years, Blee said.
BJ's implemented its first membership fee increase since 2018, with an 8% hike effective in January.
BJ Stock Action
BJ rose 2.4% to 114.66 in Wednesday afternoon stock market action. The stock is only slightly below its level before the reciprocal tariffs announcement on April 2.
BJ pulled back earlier this week but the lows didn't even test its 10-week and 50-day moving averages. BJ is sporting an excellent 95 Composite Rating out of a possible 99, according to IBD Stock Checkup. The rating combines both technical and fundamental factors into a single number.
BJ's relative strength line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, has shot higher over the past month or so. It first jumped on its fourth-quarter earnings beat on March 6 and then on its relative insulation from Trump tariffs.
While the market climate isn't conducive for putting money to work, investors should be building watchlists, including stocks showing strong relative strength like BJ's. TJX is another discount retailer performing well that may be worth a look.
One issue for BJ's and other resilient stocks in the current correction is whether they'll lead in a market uptrend. That's a key question, with Trump announcing a 90-day tariff pause for many countries, sending stocks skyrocketing Wednesday afternoon.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
